ISS US 2006 Day Two Report

Infinite Demand Seen for Semiconductors in the “new Gold Rush”

Concerns Include R&D Spending Gap, High Cost of Lithography

Half Moon Bay, California, January 10, 2006 -- Keynote speakers on the second day of ISS 2006 highlighted the widening R&D “spending gap” and painted a bright picture for the future of the semiconductor industry.

Michael Splinter, president and CEO of Applied Materials, noted that the R&D spending of semiconductor device companies was going up faster than the rate of R&D spending at equipment companies. “We need to come to more logical conclusions about how and where we spend our money,” he said.

However, Splinter was in no hurry to move to a 450mm wafer size, saying that the equipment industry did not have the money or resources for that at this point in time. “We need to do it eventually, but not right now,” he said.

Splinter also noted that the economic benefits of moving to larger wafers are diminishing. While there was a 30 percent productivity gain in going from 200mm to 300mm wafers, “the next one won’t be as good”, he said. That was partly because the industry did such a good job on 300mm, squeezing as much productivity as possible out of the larger wafers.

Splinter identified lithography as a high cost area that needs attention. “We have to do everything we can to drive down the cost of lithography”, he said.

Brian Halla, chairman and CEO of National Semiconductor, said he was more excited about the future of the industry now than ever before. It’s not a case of whether semiconductors are being driven by consumer electronics or information technology; it’s more a case of being driven by content, according to Halla.

He cited the introduction of Internet-connected hand held video devices as products that would spur demand for new content and new applications. Example; drivers stuck in traffic will be able to view live webcams of road conditions ahead.

“The first dot com boom is upon us,” said Halla, likening it to the early days of the trans-continental railroad across the U.S. The glut of optical fiber capacity put into place during the telecoms boom of 2000 is now ready to be “lit up” with broadband content, he said.

On top of this is what Halla referred to as “new Gold Rush” -- hundreds of millions of cashed-up consumers in China, India and in future Russia -- all with appetites for electronics products. Halla predicted that new networking and machine-to-machine applications would create an almost infinite demand for semiconductors in the future.